Price Fishback, 12 November 2019

The US became the ‘arsenal of democracy’ by producing a massive amount of military goods that raised real GDP by 72% between 1940 and 1945. Yet, multiplier estimates for this expansion in government spending are less than one. Long-range studies at subnational levels show that military spending was associated with small effects on per capita activity. Military spending in the context of a quasi-command economy crowded out private consumption and investment and forced people into the military. In essence, Americans sacrificed heavily to win the war, while their Allies sacrificed even more.  

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